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Fintechs see exponential growth in small-ticket loans but need to focus on sustainability: Report

Economic Times

Economic Times · 1y ago

Fintechs see exponential growth in small-ticket loans but need to focus on sustainability: Report

Fintech lenders hold a dominant position in the sub-Rs 1 lakh loan market in India, accounting for 77% of loans and 50% of the market share by value. However, their sustainability is a concern as delinquencies on loans sourced in FY23 have increased to around 5% compared to less than 2% in FY22. Fintechs are expanding their presence in smaller towns and semi-urban areas to tap into untapped opportunities. To ensure future growth, fintechs need to focus on unit economics, build sustainable business strategies, collaborate with traditional lenders, and leverage government initiatives to promote the digital economy.

Related News

Unsecured loans in focus, fintechs see NBFC credit taps drying up

Economic Times

Economic Times · 1y ago

Unsecured loans in focus, fintechs see NBFC credit taps drying up

Non-banking financial companies (NBFCs) are reducing credit disbursal to lending startups offering small unsecured loans, following regulatory strictures requiring increased risk weights for such loans. Aditya Birla Finance and Poonawalla Fincorp have informed fintech startups that they will no longer provide capital for buy-now-pay-later and small consumer loans. NBFCs prefer to work with highly rated fintechs offering loans above INR 50,000, resulting in a drying up of credit lines for small-ticket unsecured loans. The volume of sub-Rs 25,000 loans has grown fourfold, but there is a need to protect the ecosystem from defaults.

Paytm shares tank 20% after company looks to curtail low-value personal loans

Economic Times

Economic Times · 1y ago

Paytm shares tank 20% after company looks to curtail low-value personal loans

Shares of Paytm, operated by One97 Communications, plummeted 20% after the company announced plans to issue fewer personal loans below Rs 50,000 ($600). This decision comes in response to tighter regulations imposed by the Reserve Bank of India (RBI) on consumer lending, particularly for small-ticket loans. Paytm aims to focus on higher-ticket loans to lower-risk and high-credit-worthy customers, expecting a strong demand in this segment. The company estimates a 40%-50% decline in loan volume but minimal impact on revenue growth.

Paytm To Resume Loan Disbursals In First Week Of March

Inc42 · 1y ago

Paytm To Resume Loan Disbursals In First Week Of March

Paytm, the Indian fintech giant, plans to resume its loan disbursals in the first week of March. The company had temporarily ceased its small-ticket loans of less than INR 50,000 following tightened regulations by the Reserve Bank of India. Paytm is now looking to restart its lender platform provider operations, aiming to increase high-ticket personal and merchant loans in partnership with banks and non-banking financial institutions. Paytm's lending business grew rapidly in the first three quarters of 2023, with loan disbursals reaching INR 15,535 crore, but experienced a decline due to scaling down of small-ticket loans.

MSME fintechs steal show as consumer lending loses fizz

Economic Times

Economic Times · 1y ago

MSME fintechs steal show as consumer lending loses fizz

Digital lenders focused on unsecured small business loans are gaining traction as regulatory actions and changes in macroeconomic conditions make unsecured consumer loans less appealing. Companies such as Indifi, Lendingkart, Aye Finance, and Kinara Capital are expected to benefit in the MSME lending space. Large private banks are collaborating with fintechs to tap into the underbanked unsecured business credit market. The simplification of MSME registration allows banks to classify these entities easily for priority sector lending. Delinquency rates have dropped, prompting lenders to shift focus to the MSME sector. Challenges include the need for physical KYC and the cost it incurs for digital lending operations. However, fintechs in this space are showing stronger financials, attracting traditional lenders for co-lending partnerships.

Surge In Unsecured Loans By Fintechs Led To RBI’s Tightening Of Lending Norms: Bernstein

Inc42 · 1y ago

Surge In Unsecured Loans By Fintechs Led To RBI’s Tightening Of Lending Norms: Bernstein

According to a report by brokerage Bernstein, there has been a significant increase in unsecured lending by Indian banks and fintechs, leading to tighter lending norms by the Reserve Bank of India (RBI) in November last year. The report highlights the rapid growth of fintechs in the country, which has further driven the increase in unsecured lending. The RBI increased the risk weight for consumer credit exposure of banks and non-banking financial companies, aiming to increase the cost of unsecured loans. The growth in consumer loans has outpaced household credits, raising concerns among regulators. Despite regulatory measures, digital lending remains attractive for India's fintech sector.

Fintech faces its reckoning: It’s only a matter of time until the house of cards collapses

TechCrunch · 1y ago

Fintech faces its reckoning: It’s only a matter of time until the house of cards collapses

The rise of fintechs, fueled by cheap money and interchange fees, faces challenges as central banks raise interest rates. Many fintechs rely heavily on interchange fees as a source of revenue, but these fees are capped, while interest rates are not. This creates a dilemma as borrowing costs for fintechs can spiral out of control in times of rising interest rates. To survive, fintechs need to diversify their revenue streams, focus on building great software, and reevaluate their customer incentives.

Early RBI warnings on top-up loans is fair but LAP is the real worry

Money Control

Money Control · 11m ago

Early RBI warnings on top-up loans is fair but LAP is the real worry

The loan against property segment is seeing rapid growth, according to the Reserve Bank of India (RBI). The regulator has issued warnings about top-up loans, urging lenders to monitor their end-use. Small ticket loans against property make up the majority of business loans given by non-banking financial companies (NBFCs). However, signs of stress have emerged in states where loan against property is a popular product.

Paytm halts postpaid loans, to focus on distribution-only model

Economic Times

Economic Times · 1y ago

Paytm halts postpaid loans, to focus on distribution-only model

Paytm has paused the distribution of postpaid loans since February, signaling a shift in its lending approach. The value of postpaid loans distributed dropped over 90% to Rs 720 crore in the March quarter of FY24. Paytm is becoming more cautious with its small-ticket size personal loans business due to deteriorating asset quality. The company will not disburse collections-based loans unless incentivized to do so through collections bonuses. It will focus more on distribution-only models for personal loans, compressing its take rates in the 3-3.5% range. This follows a regulatory crackdown by the Reserve Bank of India.

Moneyboxx To Raise INR 271 Cr To Fuel MSME Lending

Inc42 · 1y ago

Moneyboxx To Raise INR 271 Cr To Fuel MSME Lending

Moneyboxx, a small business lender, is aiming to raise around INR 271 Cr ($36.5 million) through a combination of preferential issue and warrants. The company plans to utilize the funds to support its growth and expand its operations in rural areas of India. Moneyboxx specializes in providing small ticket business loans to micro and small enterprises (MSMEs) in Tier III cities and below. It was co-founded by Mayur Modi and Deepak Aggarwal.

Paytm slowing down low ticket Postpaid loans by around 50%, accelerating high ticket loans

Money Control

Money Control · 1y ago

Paytm slowing down low ticket Postpaid loans by around 50%, accelerating high ticket loans

Paytm has announced that it will be slowing down its small ticket Postpaid loans while focusing on expanding high ticket personal loans and merchant loans. This decision is in line with recent regulatory guidance and aims to ensure a healthy loan portfolio. While there have been complaints from users regarding blocked accounts, Paytm has denied stopping the loan service and claims that it is upgrading the experience and enhancing security measures. The company's lending partners have not stopped lending to its customers.

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